Lack of lease concerns some on council

December 15, 2012

EAST PALESTINE - Will East Palestine land be leased for oil and gas drilling? That was the question two members of council asked this week.

Council members Ellen Beagle and Alan Cohen said they are worried the village will be "left out" of a lease and wondered why nothing more has been done since council agreed to work with Salem-based Buckeye Mineral Development (BMD) LLC earlier this year.

The for-profit company owned by Bob Rea is negotiating terms with major oil and gas exploration companies on the village's behalf, and Rea previously estimated the village could reap at least $5,000 per acre and 18 percent royalty on any oil or gas recovered from municipal property.

The village is looking to lease somewhere between 130 and 140 acres and began discussing the option at the end of 2011.

In August council approved paying a fee to BMD for the negotiation. Prior to that, village solicitor Shirley Smith was negotiating leases with other companies, including Chesapeake Energy but primarily British Petroleum (BP). In fact, BP was mapping out the municipal land last summer and discovered there was about 15 to 20 more acres than originally recorded, she said.

"I know we're not apathetic about getting this done, but what can we do? I feel like I'm spinning my wheels here ... Is there something wrong with us that we aren't getting anything?" Beagle said.

Village Manager Pete Monteleone said he talks with BMD on a weekly basis and there is nothing more he can do other than wait until a driller makes an offer.

"They (BMD) made it sound like at this point they are talking to the drillers and something is about to break ... I can't do anything, it's up to them," he said.

He added it may be taking longer than anticipated to have a lease offered because of the development's restrictive lease language.

Cohen noted that the city of Salem had property leased within four months after starting negotiations. Salem signed a lease with Chesapeake Energy this summer for 381 acres of city-owned land and earned $1.3 million. The lease included 20 percent royalties and an additional $3,500 per acre for a three-year extension.

"My concern is the same as Ellen, we are going to get left out here. I get asked almost every day, 'Why isn't council doing something?'" Cohen said.

Councilman Don Elzer argued the village wouldn't be left out because it has "too much acreage" on the table.

"We aren't going to be left behind," he said.

Smith pointed out that she had a formal lease offer at one point but council "elected not to take it." The offer was not discussed during a public meeting, although it was hinted at during a meeting prior to the meeting in which BMD was hired to negotiate.

Smith has never disclosed publicly how much money the village could earn through a lease, and Monteleone did not have an estimate on Monday.

Councilman Fran Figley was optimistic it could be upwards of $5,000 an acre.